HBC steps up from the discounters

The Hudson's Bay Co. -- the venerable HBC -- this week moved deeper into the luxury end of the retail market by agreeing to buy Saks Inc., the high-end retailer famous for its Saks Fifth Avenue flagship store in New York. The move might help strengthen the HBC brand and differentiate it more sharply from discount chains Target and Walmart, which are expanding in Canadian cities. It should also help assure variety and choice for Canadian consumers. It still leaves Winnipeg wondering what use should be made of the magnificent old Hudson's Bay department store on Portage Avenue.

HBC bought the up-market U.S. chain Lord & Taylor, completing the acquisition in January 2012, and shed most of its Zellers discount stores during the last couple of years to focus its efforts more and more on the luxury consumer. Saks, in the same way, sold most of its discount outlets in recent years and launched its OFF 5TH chain and its OFF-5TH.com website to serve the discount shopper without obscuring its luxury-brand identity.

Both firms aim to be omni-channel luxury retailers. This means they intend to address the high-price consumer through all available means -- television, radio, print advertising, Internet, social media and store visits. They aim to tie those different forms of contact so closely together that the consumer enjoys a seamless shopping experience. This is easier said than done. It can break down, for example, when the consumer likes something on the company website, goes to the store to try it on and finds they don't actually have it.

HBC operates 25 million square feet of Hudson's Bay, Home Outfitters and Lord & Taylor stores. Saks, by comparison, operates just seven million square feet of store space. Yet while HBC reported $884 million of retail sales from all that square footage in the first quarter of this year, Saks reported turnover of $793 million -- nearly equal sales from about one-quarter of the space. The comparison suggests HBC could move a great deal more merchandise through those stores or else could close some stores and still maintain the current level of sales.

The purchase of Saks suggests HBC means to narrow its focus to the high-price shopper, move business online and rely less on the physical presence of the customer in the store. It's tough to see where the Winnipeg landmark store at Portage Avenue and Memorial Boulevard fits into that strategy.

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